This update highlights the legal and regulatory developments, occurring in the first half of 2026, that we see as the most relevant to Financial Advisers and Accountants.
Financial Adviser Industry Developments
The most significant development for the first half of 2026, is the fallout from the Shield and First Guardian Master Funds, which it is now apparent will have industry-wide ramifications.
The Shield and First Guardian Master Fund schemes involved people, who were often cold called, being advised to roll over their superannuation savings into self-managed superannuation funds and invest those savings into the Shield and First Guardian Master Funds, which were managed investment schemes, and which have subsequently collapsed. In addition to the financial advice being recognised as inappropriate to investors, there have been significant conflicts of interest identified in the funds’ management.
To prevent repeats of such schemes, and to ensure that costs are not borne by clients seeking financial advice and financial advisers doing the “right thing”, ASIC and the government appear to be on the brink of implementing surveillance, governance, regulatory and insurance reform.
a) Changes to professional indemnity insurance
It is likely that the government will contemplate reform to mandatory requirements for professional indemnity insurance held by financial advisers, with the Department of the Treasury inviting consultation on “the effectiveness of professional indemnity insurance in responding to compensation claims” in December 2025, with that consultation process having closed in February 2026.
b) Compensation Scheme of Last Resort (CSLR) releases initial levy estimates for FY2027
The Compensation Scheme of Last Resort (CSLR) was established to provide persons who are unable to recover against financial advisers following a finding in AFCA with payments up to $150,000.
The fallout from the Shield and First Guardian funds is predicted to put considerable strain upon the scheme. The scheme is funded generally by levies upon members of the sub-sector, such that levies to meet the payments made by the CSLR to complainants with no prospect of recovery from the person from whom they have received advice are paid by other financial advisers (initially) and other financial services providers. Levies being spread in that manner may have the impact of making financial advice increasingly unaffordable in view of the increasing reliance on the CSLR.
The Initial Estimate for FY2027 actuarial report of October 2025, released by the CSLR in November 2025 is $137.5 million, comprised most significantly of $126.9 million for personal financial advice. The report considers the impact of several large failures in the financial advice sector, largely related to the Shield and First Guardian Master Funds.
That initial estimate is appreciably much higher than the legislated sub-sector levy cap (of $20 million), which may be initially raised, and those levy estimates of prior financial years for the personal financial advice sub-sector:
- FY24 – $2.4 million;
- FY25 – $18.5 million; and
- FY26 – $70.11 million (revised to $67.289 million).
Themes explored by the consultation paper include:
- Further ASIC oversight over the adequacy of professional indemnity cover;
- The affordability of cover;
- The involvement of industry bodies or representatives networks might have in accessing professional indemnity cover;
- Whether currently minimum requirements for professional indemnity cover are sufficient;
- How the gap between the cover offered by professional indemnity policies and the minimum requirements should be addressed;
- How professional indemnity cover could be made more responsive to claims made by persons where a financial firm is in administration; and
- Recovery which might be made by the CSLR against professional indemnity insurers.
c) ASIC enforcement and regulatory update
In February 2026, ASIC reported on its enforcement and regulatory activity for the period of July to December 2025.
ASIC identified, among its enforcement priorities in 2025, misconduct exploiting superannuation savings and unscrupulous property investment schemes.
The Shield and First Guardian type schemes are an enforcement priority for 2026.
d) Review of SMSF establishment advice
ASIC published its review into the quality of personal advice provided by financial advisers to retail clients about establishing SMSFs in November 2025.
The report identifies significant concern about SMSF establishment advices, with ASIC concluding that 62 of the 100 client files reviewed fail to demonstrate compliance with the best interests duty and related obligations.
Licensees whose written policies and procedures covered SMSF suitability factors and considerations outlined in ASIC’s information sheet 274 ‘Tips for giving self-managed superannuation fund advice’ demonstrated higher compliance.
ASIC had concerns that many of the licensees’ pre-vetting (involving review of the advice and related client file records before advice was provided) and conflict of interest policies were ineffective.
A number of action points are identified by ASIC, to improve SMSF establishment advice to retail clients, including, but not limited to:
- Not mis-selling SMSFs on the basis of “control”;
- Considering the clients’ circumstances for suitability;
- Considering the clients’ needs for suitable and affordable insurance;
- Including SMSF suitability factors and considerations in policies and procedures; and
- Ensuring effective monitoring and supervision.
Implications
There is no doubt the fallout from the schemes involving the Shield and First Guardian Master Funds will lead to significant reforms, with the most significant proposals detailed above.
Prudent underwriting and careful consideration of insureds who have appropriate risk management protocols will remain critical. For underwriters who apply careful consideration when writing risks in this category, the scrutiny that will follow the First Guardian and Shield circumstances, will no doubt be welcome news. A significant proportion of financial planners are doing “the right thing” and those professionals will also see the recommendations as being an opportunity to weed out rogue players in their industry.
Accounting Industry Developments
a) Amendments to superannuation tax
Amendments have been passed in Parliament to the superannuation tax scheme with super accounts with a balance over $3 million now being taxed at 30% and super accounts with a balance over $10 million now being taxed at 40%.
This comes in addition to amendments to the low-income superannuation tax offset which is increasing from $500 to $810 and will soon by paid to anyone with a taxable income below $45,000.
This is likely to have large impacts on those who use superannuation as an estate planning tool and those utilising a SMSF.
b) Preparation for Payday Super Laws
Payday Super Laws come into effect on 1 July 2026 which are changing the way Australians receive superannuation. New laws mandate that superannuation payments must be paid to an employee’s superfund on payday and received by the fund within 7 days. This is a considerable change from the previous quarterly super payments, and the Australian Taxation Office has recently published draft law comparison rulings for public consultation.
The draft rulings are designed to support tax professionals and clients to prepare for the change and include guidance on qualifying earnings, eligible contributions, calculation and assessment of superannuation guarantee change, and application and transition provisions.
Implications
There is a lot less upheaval in the accounting industry with the changes made likely to lead to a positive increase in activity for accountants.
Decisions & Determinations impacting financial advisers
ASIC-issued ban varied from six years to three years
- In Petrovic and Australian Securities and Investments Commission [2025] ARTA 2717 (11 December 2025), an employee of United Global Capital Pty Ltd, one of the actors in the Shield and First Guardian Master Funds scheme, sought review of a decision by ASIC to ban him for a period of 6 years.
- While it was accepted that the applicant had breached many of his duties as a financial adviser, the applicant submitted that a competent employee working as a junior financial adviser would not have rejected their employer’s instructions and procedures for providing limited advice, he had shown insight into his actions and he did not pose an ongoing risk.
- It was observed that the applicant sought to divert attention towards his employer and maintain that his misleading clients was inadvertent. However, his evidence was that he had some concerns about UGC’s business model but took no action. This demonstrated a continuing unsatisfactory approach to understanding his role.
- Nevertheless, the ban of six years was reduced to three years. It was felt that there should be specific and general deterrence, in addition to protection of the public. The applicant would need time to address the concerns raised by the Tribunal, including by further training.
ASIC-issued ban varied from eight years to four years
- In Bringans and Australian Securities and Investments Commission [2026] ARTA 149 (30 January 2026), the applicant, who was a responsible manager and key person for AFSLs of various companies, sometimes simultaneously, sought review of a decision by ASIC to ban him for eight years.
- The Tribunal found that the applicant was a “no show” responsible manager, which threatens the integrity of the financial services licensing system. It was noted that he gave the false impression to ASIC that he was taking an active role in seeing that AFSLs complied with their obligations.
- On the rare occasions he raised concerns about compliance, he was noted to have accepted assurances without any proof or independent investigation.
- He was not a fit and proper person and not competent to provide financial services. His abdication of his duties and failure to learn from his mistakes indicated he was likely to contravene financial service slaw in the future. However, on the available evidence, he did not have actual knowledge of the contraventions of the AFSLs, as contended for by ASIC.
- There is a strong need to protect the public from the type of conduct in which the applicant engaged. The Tribunal varied the ban of eight years to four years.
AFCA UGC decisions
In the first half of 2026, AFCA has issued a number of decisions arising from the advice provided by the licensee United Global Capital Pty Ltd (in liq), one of the principal actors in the Shield and First Guardian Master Funds scheme.
The decisions involve losses often significantly higher than the limit under the CSLR (for individual claimants).
AFCA published a video explaining the lead decision to persons similarly affected by financial advice received from UGC make claims – linked here.
Delay in SMSF rollover caused financial loss
In AFCA’s determination relating to Sovereign Financial Group Pty Ltd (AFCA case no. 12-25-239650), AFCA found that the financial firm should pay the complainant for a delay in rollover of funds in an SMSF to an Australia Super account even though there was an investment gain. The financial firm had made an ex gratia offer of payment of $2,000.
It was recognised that a portion of her new adviser’s invoice related to undoing the error of the financial firm under review, which was incurred by reason of the error and therefore should be paid by the financial firm. $2,000 for non-financial loss was also required in circumstances where a three-week delay beyond the 10 days stated to her. Given the time of year (late December “when spending is typically high”), and noting that the complainant had no access to her funds, needed to borrow money from her son, she could not enquire of the financial firm (which was closed for the Christmas period) and was therefore understandably stressed, that amount for non-financial loss was fair and reasonable.
Fraudulent use of complainant’s money
AFCA’s determination in Wealth Trail Pty Ltd (in liquidation) (AFCA case no. 12-24-101271) involved an authorised representative taking money from persons instead of investing the funds as promised.
Wealth Trail’s Australian financial services licence had previously been cancelled by ASIC following payment of compensation by the CSLR in the wake of previous AFCA determinations.
The circumstances which have led to the cancellation of the licence concerned theft by an authorised representative of clients’ money – including family and friends – to fund a gambling habit. The financial adviser pleaded guilty to fraud offences.
The decision continues to underscore how, even wildly inappropriate behaviour or outright fraud on the part of an authorised representative, will be brought home to a licensee.
Dishonest and fraudulent conduct by an adviser
In Garan Holdings Pty Ltd v Stonepoint Capital Management Pty Ltd (in liq) (No 2) [2026] NSWSC 373, HBA Legal acted for Underwriters, who declined indemnity as various exclusions under the PI policy applied. The insured, Mr Phillip Hunt (fourth defendant) was self represented in the proceedings.
Mr Hunt was an accountant and financial adviser for the plaintiffs. The plaintiffs claimed over $10 million in losses arising from investments made in the Stonepoint Capital Fund (“the Fund”) between December 2021 and October 2022. Stonepoint invested the majority of the Fund by way of an unsecured loan to Fortico Associates who then invested and suffered significant losses on a foreign exchange scheme. The insured, Mr Hunt, was a director of Fortico. The plaintiffs/investors were never made aware of this.
The plaintiffs alleged breaches of trust and fiduciary duties as Mr Hunt:- did not disclose the true acitivity of the Fund or his role as director of Fortico, he made false statements, delayed and deflected responses to redemption requests, deliberately failed to disclose the Fund’s catastrophic losses whilst soliciting further investment after such losses, mispent Fund money to benefit himself, and concealing or fabricating documents to mislead.
The plaintiffs were successful in their claim. The Court held that the Fortico loan was made with dishonest intent, breaching the duty of a trustee to exercise its powers honestly and in good faith. The Court also held that Mr Hunt and Fortico knowingly assisted in Stonepoint’s breaches of trust and that the breach of trust amounts to a fraudulent or dishonest design by Stonepoint.
Conclusion
The widespread loss occasioned by the schemes involving the Shield and First Guardian Master Funds may be viewed as resulting from a significant regulatory oversight. To prevent repeats of such episodes, and to ensure that costs are not borne by clients seeking financial advice and financial advisers doing the “right thing”, ASIC and the government appear to be on the brink of implementing surveillance, governance, regulatory and insurance reform.
It is expected that the practical implications of the reform will be increased scrutiny upon financial advisers’ advice and, potentially, increased liability on the part of insurers, as the risk of financial advice is shifted away from the consumer.
Scrutiny is likely to be brought to bear on financial products which may also be apt to give rise to potential conflicts of interest, with, for example, it being reported in various media outlets that ASIC has commenced a probe into providers of separately managed accounts.
Again, it will remain critical that there is both prudent underwriting and careful consideration of insureds who have appropriate risk management protocols. There is no doubt that the scrutiny that will follow the First Guardian and Shield circumstances, will be welcome news for underwriters who apply careful consideration when writing risks in this category. Of course, most financial planners are doing “the right thing” and those professionals will also see the recommendations as being an opportunity to weed out rogue players in their industry.
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Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. For any legal advice please contact us.